Bumi Resources concludes purchase of KPC

Rendi A. Witular, The Jakarta Post, Jakarta

Publicly listed mining company PT Bumi Resources completed the acquisition of coal mining firm PT Kaltim Prima Coal on Friday from Anglo-American energy firm BP Plc. and Anglo-Australian mining giant Rio Tinto.

Bumi finance director Eddie J. Soebari told The Jakarta Post by telephone that the company had concluded the purchase of KPC by paying a total of US$500 million, including assumed debt, to BP and Rio Tinto.

BP and Rio Tinto, through their foreign-registered vehicle companies, equally owned the entire stake in KPC.

"I confirm that Bumi, BP and Rio Tinto have signed an accord on the completion of the deal. As of now, KPC belongs to Bumi," said Eddie, adding that Bumi would replace the current KPC executives and commissioners by next week.

Eddie, however, refused to elaborate on the content of the accord or to specify Bumi's financial sources for the acquisition, saying all of the details would be delivered next week.

He hinted that the financing came from several foreign and local financial institutions grouped under the International Club Deal Consortium, which agreed to provide about US$400 million in loans.

KPC is valued at $500 million. As an initial payment, Bumi paid $40 million in July to BP and Rio Tinto, with the remaining $460 million to be paid later from loans raised from the consortium.

BP and Rio Tinto have given Bumi until Oct. 10 to settle the payment.

In a press statement, BP confirmed it had completed the sale of KPC to Bumi for $250 million in cash, including assumed debt. BP also said that Bumi had completed a similar deal with Rio Tinto.

The completion of the sale means that Bumi is now the sole owner of KPC, BP said.

KPC operates a huge coal mining site in Sangatta, Kutai Timur regency, producing about 16 million tons of coal a year. Some 96 percent of the high-quality coal is exported to international markets, generating $450 million in revenue each year.

Under a contract of work with the central government, the KPC's former owners, BP and Rio Tinto, were obliged to divest a majority stake in the firm to local investors. However, this divestment program has been stalled for more than two years.

The deal with Bumi has angered many governmental officials, as it was reached while a team set up by the Office of the State Minister for State Enterprises was in the process of finalizing talks on the divestment of a majority KPC stake to the East Kalimantan administration and state coal mining firm PT Tambang Batubara Bukit Asam.

The province and the state firm were to have purchased a combined 51 percent stake in KPC.